(Alliance News) - InfraStrata PLC on Tuesday said it has signed a binding term sheet with Vitol SA over long-term storage capacity offtake at its Islandmagee gas storage facility in Northern Ireland.
Shares in natural gas storage developer InfraStrata were down 2.5% at 0.81 pence in morning trade, but had been up as much as 13% shortly after the market open.
Energy trading firm Vitol signed the term sheet with InfraStrata's Islandmagee Energy Ltd subsidiary. Vitol will enter a 12-year exclusive gas storage agreement for offtake at the gas storage facility, which has yet to be built but is intended to store 500 million cubic metres of natural gas.
Construction of the gas storage caverns is to begin in 2019 with first gas injected under the gas storage agreement in the fourth quarter of 2022. Full commercial operations will commence in its storage year ending April 2024.
InfraStrata's modelling indicates that, if the storage facility has been operating for the past ten years, its effective storage capacity charge would have been between 28p and 38p per therm annually.
Given this estimate, when the entire working volume of 500 million cubic metres is available to Vitol, projected annual revenue is expected to be between GBP50 million and GBP65 million at project level prior to maintenance and other costs.
The term sheet has an initial term of 12 months, which can be extended by six months at a time thereafter.
InfraStrata Chief Executive John Wood said: "We are extremely happy to welcome Vitol on board as the exclusive offtake partner for our Islandmagee gas storage project. We have spent considerable time working with Vitol to ensure that the agreement reached has a positive outcome for both parties. Whilst subject to final contract, this is the first commercial gas storage deal that has been entered into in the UK for several years, clearly demonstrating the market demand for this type of storage facility."